|By Joshua Franklin

|By Joshua Franklin

|By Joshua Franklin

|By Joshua Franklin

|By Joshua Franklin

|By Joshua Franklin

NEW YORK (Reuters) - Spotify Technology SA's <SPOT.N> unusual route to becoming a public company is a test case for other multibillion-dollar tech companies that are looking to sell their shares but are not in need of cash.

On Tuesday, investors will be able to buy and sell shares in the Swedish music streaming service in the New York Stock Exchange's first-ever direct floor listing.

This is without Spotify having hired investment banks as underwriters and undertaking an investor road show as is typical in a traditional initial public offering (IPO).

If it goes well, other highly valued tech firms expected to pursue a listing in the future, with the likes of U.S. ride hailing companies Uber Technologies Inc [UBER.UL] and Lyft Inc, could look to adopt a similar approach.

Wall Street banks will also be seeking feedback from investors on the day, and are looking to come up with ways to make up at least part of the millions of dollars in potential lost underwriting fee revenue.

"Everybody is going to watch what will happen with Spotify," said Columbia Law School professor John Coffee, who focuses on securities regulation.

Given the listing's first-of-its-kind nature, observers will be watching to make sure Spotify's public market valuation does not plunge below previous private valuation and trading holds relatively steady.

Spotify can eschew a traditional IPO because it does not require fresh capital and is a popular consumer brand about which the investors do not need educating through a road show.

"This is a big moment for the venture capital industry," said Felix Capital managing partner Frederic Court, a European venture capitalist. "It will enable billions to be returned back to investors, which will release more capital into Europe."

Spotify's direct listing also follows a mixed bag of recent IPOs by some of the so-called tech unicorns that had been worth at least $1 billion.

Snapchat owner Snap Inc <SNAP.N> and meal-kit subscription company Blue Apron Holdings Inc <APRN.N> have failed to live up to their IPO valuations once they started trading in public markets.

In Blue Apron's case, its market capitalization has fallen from a peak of more than $2.5 billion to less than $400 million.

But Dropbox Inc's <DBX.O> March IPO saw shares in the cloud-based file storage company surge more than 35 percent on their first day of trading, evidence the traditional IPO route can still be a success for startups.

"Both Dropbox and Spotify are very prominent unicorns. Those are two paths," Coffee said.

Lyft said in December its latest round of funding brought its valuation to $11.5 billion. Uber's latest valuation has been pegged at more than $70 billion.

Uber and Lyft did not respond to requests for comment on the Spotify listing.

MARKET COMFORT

Loss-making Spotify, which has prioritized rapid growth over profit and whose closest rival is Apple Inc's <AAPL.O> Apple Music, launched in 2008 and had 71 million subscribers at the end of 2017.

Run by co-founder Daniel Ek, Spotify was valued at around $20 billion based on private stock transactions in February, according to its filing for the listing.

Citadel Securities will act as the designated market maker for Spotify's shares, a source familiar with the listing said, and set the opening price on Tuesday.

Spotify has hired Goldman Sachs Group Inc <GS.N>, Morgan Stanley <MS.N> and Allen & Company LLC as financial advisers but they will not have an underwriting role.

"This approach will save the company money, but will probably lead to volatility when the stock starts trading, as the market tries to find a price it's comfortable with," Laith Khalaf, senior analyst at Hargreaves Lansdown, wrote in a note.

One equity capital markets banker at a major firm, which was not on the direct listing, said their syndicate desk had been instructed to ask investors for feedback following the Spotify listing.

Syndicate desks market, price and distribute stock offerings.

The purpose will be to give the bank color to take into pitch meetings with prospective clients if the direct listing is considered a success.

(Additional reporting by Salvador Rodriguez in San Francisco, Eric Auchard in London and Chuck Mikolajczak in New York; Editing by Meredith Mazzilli)